Telecom Italia Fails to Get Quorum to Oppose Olivetti

Published: April 12, 1999

TURIN, Italy, April 11—
Telecom Italia S.p.A., Italy's No. 1 phone company, has failed to win shareholder support for fending off Olivetti S.p.A.'s $65 billion hostile offer. The rejection opens the way for foreign rivals to join the bidding.

Only 22.4 percent of Telecom Italia's shareholders attended a meeting in Turin on Saturday, too few for a vote on the company's proposed takeover defense. The proposal needed the backing from 30 percent of all investors, and the presence of one-third for a quorum. Olivetti had threatened to withdraw its bid if the proposal were accepted.

The failed plan, backed by Franco Bernabe, Telecom Italia's chief executive, would have given voting rights to the company's savings shares. The hostile takeover offer does not cover the savings shares, and the conversion of that stock into voting shares would have added $27 billion to the bid's value.

The rejection of the plan may prompt Telecom Italia to seek a foreign partner like Deutsche Telekom A.G., SBC Communications Inc. or British Telecommunications P.L.C., a board member said, as it tries to fight Europe's biggest hostile offer.

''Bernabe can no longer go it alone,'' said Luca Mori, who helps manage an Italian investment portfolio at Fondicri S.p.A. in Rome. ''The outcome means that Telecom Italia will either get bought by Olivetti, or will lose part of its independence to a foreign 'white knight' phone company.''

Telecom Italia's board said it would ''reserve its decision'' on convening a new shareholders meeting, without setting a date.

Because there was no quorum, shareholders also did not vote on a plan to buy back Telecom Italia stock valued at 9 billion euros, or about $9.8 billion.

The board said it would consider Olivetti's offer once a formal prospectus is presented, while asking Mr. Bernabe to evaluate other ''proposals that the market might present.''

Olivetti said the outcome of Saturday's meeting showed the market ''wasn't interested'' in Mr. Bernabe's proposals.

''Shareholders who back Olivetti's bid have simply voted with their feet,'' said Fabio Cappa, a fund manager at ICCRI S.p.A., who also decided not to attend.

The lack of quorum was a surprise because Telecom Italia said Friday night that more than a third of all investors had registered to participate in the meeting.

Mr. Bernabe said the attendance rate was normal for a company with such a fragmented shareholder base as Telecom Italia.